gc
24 August 2003, 08:52 PM
As downtown values drop, tax rolls suffer
High-price property owners' appraisal appeals take big toll
09:37 PM CDT on Saturday, August 23, 2003
By VICTORIA LOE HICKS / The Dallas Morning News
http://www.dallasnews.com/latestnews/stories/082403dnmetdowntownvalues.2254d.html
Dallas' tax base shrank nearly $370 million this year as the result of protests by a few dozen high-dollar property owners in and near downtown. That translates to a combined shortfall of more than $10 million in tax revenue for the city, DISD and other local governments.
Downtown owners and real estate experts said the slide from the initial assessed values is an inescapable consequence of high vacancies and low rental rates for offices and apartments.
"We don't make the market what it is; we measure the market," Foy Mitchell Jr., chief appraiser for the Dallas Central Appraisal District, told the City Council earlier this year.
But Mr. Mitchell also said that because state law does not compel businesses to fully disclose real estate transactions or the value of their assets, they probably don't carry enough of the tax load.
"I think the homeowner is paying more than his or her share because of escaped taxation" of businesses, Mr. Mitchell said.
Homeowners' representatives said they understand the woes facing office and apartment owners. But they, as well as some council members, said major developers are at an advantage, because they can hire aggressive, highly skilled tax agents to negotiate with the appraisal district.
"Homeowners don't have the same kind of resources," said Jeri Arbuckle, president of the Dallas Homeowners' League. "Businesses are much better able to have their voices heard."
Council member Bill Blaydes agreed. Although the appraisal process "dramatically affects the life of every citizen," he said, "how it works is not something John Q. Public understands."
A silver lining?
City Manager Ted Benavides said that although the disappearance of property value from the tax rolls means less money for city services – especially for efforts to revitalize downtown – it also lets building owners keep rents lower, making downtown more attractive to new tenants.
"In the short term, it's not good," he said. "It hurts the city because there's less property tax income. But it puts those buildings in a more competitive posture."
Mayor Laura Miller did not respond to requests for an interview.
When the protest period ended in July, the city's residential tax base was nearly 9 percent larger than in July 2002. The commercial tax base had shrunk by 3 percent, and the value of business personal property such as computers and office furnishings was down 4 percent.
The appraisal district doesn't track how many protests succeed, so it's impossible to know whether protests over appraisals of commercial properties are more successful than those over homes, or whether disputes over very valuable properties bring proportionately greater reductions than those over modest ones.
But one thing is clear: Owners whose properties are worth tens or hundreds of millions of dollars are especially likely to protest their appraisals.
Roughly one in four taxpayers protested the "notified value" established in May by the Dallas Central Appraisal District. Among owners of the $50 million-plus holdings in downtown and Uptown, 90 percent lodged protests.
"A lot of times, they protest all of them, right, wrong or indifferent," said Cheryl Jordan, head of the appraisal district's taxpayer liaison office.
Successful protests
Those protests paid off. More than $200 million in reductions went to 10 owners represented by a single tax agent, Deloitte & Touche Tohmatsu. Leading the list was Trizec Properties, which won $58 million in reductions on three downtown office towers.
They were Renaissance Tower, Plaza of the Americas and Bank One Tower, whose appraisals were reduced by 24 percent, 15 percent and 14 percent, respectively. Other major buildings that saw double-digit reductions included Thanksgiving Tower, Bank of America Tower and the building that houses Univision's offices.
Forty-nine properties owned by 34 owners saw reductions of at least $1 million, for a total drop of $370 million. They included large apartment blocks in Uptown as well as many of downtown's most recognizable skyscrapers
On average, the July "certified value" of those properties was 12 percent less than the notified value.
"There's just so much [empty] space," said Chuck Dannis, president of Crosson Dannis Inc., which specializes in real estate valuation. "2003 may be the year we hit bottom."
Downtown Dallas is not alone in struggling to fill its office space. Chicago, Los Angeles, Boston and Atlanta have seen many tenants flee.
In Dallas, the May-through-July protest period saw a reduction of 8 percent in the market value assigned to commercial properties citywide and a 1 percent decline in the total value assigned to residential properties. In some cases, owners may seek to lower their tax liability further through lawsuits.
In recent years, many of the major downtown owners have beaten a path to the courthouse.
Improving downtown
Thom Ridnour, Trizec Properties' regional vice president, said that many top-level executives, including himself, are working not only to safeguard their companies' bottom lines but also to make downtown a more vibrant place. Mr. Ridnour serves on the mayor's Inside the Loop Committee, which has come up with a comprehensive strategy to generate both private and public investment in downtown.
"Downtown has to get healthier" if the city is to flourish, he said, because downtown includes a major share of the tax base.
"We've got a problem in 2003 relative to the [downtown] tax base," he said. But he echoed Mr. Dannis' suggestion that the worst may already have transpired.
"Things tend to spike in Dallas," he said. "They spike down, and they spike up. We're kind of at the bottom again. We'll come back."
Belo Corp., owner of The Dallas Morning News, was among the downtown owners that won substantial reductions in assessed values.
Deloitte & Touche obtained a reduction of $882,000 off the initial $12.8 million appraisal on the Belo Building, the corporation's 17-story headquarters on Record Street. A different tax agent was responsible for taking $1.3 million off the original appraisal of $15.5 million of the complex on Young Street that houses the newspaper, WFAA-TV and TXCN cable news.
A Belo spokesman said the protest concerning the office building rested on data about the prevailing market for downtown office space.
The process
Many disputes over appraisals are resolved in informal talks between owners and appraisal district staff members. Those that aren't generally are heard by a three-member panel of the larger Appraisal Review Board, whose members are appointed by the appraisal district's board of directors.
The directors are appointed by city councils and other government bodies within the district's boundaries.
Appraisals on houses are based almost wholly on what homes of comparable size are selling for in nearby neighborhoods. Commercial appraisals also rest on sales figures, combined in the case of office buildings and apartments with data about occupancy and rental rates.
The appraisal district's initial assessment rests on general information about market conditions; owners who protest must supply specific information to demonstrate why their properties do not conform to typical market patterns.
"They might say, 'We've got more vacancies than you were aware of,' " Ms. Jordan said.
If the appraisers undervalue a property, the owner has no obligation to correct the mistake.
"When we're high, they have a lot of incentive to tell us," Ms. Jordan said. "If we're too low, guess what? We don't hear from them."
Both appraisal district officials and city council members said the system would be fairer if businesses were forced to supply more information.
"The council is frustrated," said council member Veletta Forsythe Lill. "The council has complained bitterly."
Ms. Lill, whose district encompasses the downtown core, doesn't fault the big developers for trying to minimize their tax liability.
"I do understand that they have to make a profit from their buildings," she said. "But the residential owners don't want to pay more than their fair share, either."
'Major problems'
Mr. Blaydes said he's most concerned that apartment owners may be paying too little. He said there's often a discrepancy between what apartment blocks are appraised at and what similar properties are selling for.
"I think we have major problems there," he said.
"We will be seeking a closer look," Mr. Blaydes promised. "It affects the money we have to run the city on."
The $2.6 million the city will lose as the result of protests on downtown properties would hire 40 additional police officers or senior librarians. It's a little less than 1 percent of all the money the city expects to get from property taxes in the next fiscal year.
Ms. Arbuckle said most homeowners are willing to pay what they're assessed – even if it's an increase – as long as they feel they're getting good city services.
Even though she's a longtime neighborhood activist, she said, she had never lodged a protest until last year, when her appraisal jumped by nearly 50 percent. And although she's a lawyer, she said, she didn't know what to expect.
"It's not that clear what factors they're going to weigh," Ms. Arbuckle said. She was also surprised, she said, to arrive at the hearing and learn that she would have only five minutes to make her presentation.
Ms. Jordan said all protests, big and small, are handled with equal care. "We treat them all the same," she said. "We want the right value."
Ms. Arbuckle said she has no wish to pit homeowners against business owners.
But by the same token, she said, one of Dallas' strengths is that homes are relatively affordable.
"That's a huge draw," she said. "If the cost of home ownership gets too high, people can't afford to live that American dream."
High-price property owners' appraisal appeals take big toll
09:37 PM CDT on Saturday, August 23, 2003
By VICTORIA LOE HICKS / The Dallas Morning News
http://www.dallasnews.com/latestnews/stories/082403dnmetdowntownvalues.2254d.html
Dallas' tax base shrank nearly $370 million this year as the result of protests by a few dozen high-dollar property owners in and near downtown. That translates to a combined shortfall of more than $10 million in tax revenue for the city, DISD and other local governments.
Downtown owners and real estate experts said the slide from the initial assessed values is an inescapable consequence of high vacancies and low rental rates for offices and apartments.
"We don't make the market what it is; we measure the market," Foy Mitchell Jr., chief appraiser for the Dallas Central Appraisal District, told the City Council earlier this year.
But Mr. Mitchell also said that because state law does not compel businesses to fully disclose real estate transactions or the value of their assets, they probably don't carry enough of the tax load.
"I think the homeowner is paying more than his or her share because of escaped taxation" of businesses, Mr. Mitchell said.
Homeowners' representatives said they understand the woes facing office and apartment owners. But they, as well as some council members, said major developers are at an advantage, because they can hire aggressive, highly skilled tax agents to negotiate with the appraisal district.
"Homeowners don't have the same kind of resources," said Jeri Arbuckle, president of the Dallas Homeowners' League. "Businesses are much better able to have their voices heard."
Council member Bill Blaydes agreed. Although the appraisal process "dramatically affects the life of every citizen," he said, "how it works is not something John Q. Public understands."
A silver lining?
City Manager Ted Benavides said that although the disappearance of property value from the tax rolls means less money for city services – especially for efforts to revitalize downtown – it also lets building owners keep rents lower, making downtown more attractive to new tenants.
"In the short term, it's not good," he said. "It hurts the city because there's less property tax income. But it puts those buildings in a more competitive posture."
Mayor Laura Miller did not respond to requests for an interview.
When the protest period ended in July, the city's residential tax base was nearly 9 percent larger than in July 2002. The commercial tax base had shrunk by 3 percent, and the value of business personal property such as computers and office furnishings was down 4 percent.
The appraisal district doesn't track how many protests succeed, so it's impossible to know whether protests over appraisals of commercial properties are more successful than those over homes, or whether disputes over very valuable properties bring proportionately greater reductions than those over modest ones.
But one thing is clear: Owners whose properties are worth tens or hundreds of millions of dollars are especially likely to protest their appraisals.
Roughly one in four taxpayers protested the "notified value" established in May by the Dallas Central Appraisal District. Among owners of the $50 million-plus holdings in downtown and Uptown, 90 percent lodged protests.
"A lot of times, they protest all of them, right, wrong or indifferent," said Cheryl Jordan, head of the appraisal district's taxpayer liaison office.
Successful protests
Those protests paid off. More than $200 million in reductions went to 10 owners represented by a single tax agent, Deloitte & Touche Tohmatsu. Leading the list was Trizec Properties, which won $58 million in reductions on three downtown office towers.
They were Renaissance Tower, Plaza of the Americas and Bank One Tower, whose appraisals were reduced by 24 percent, 15 percent and 14 percent, respectively. Other major buildings that saw double-digit reductions included Thanksgiving Tower, Bank of America Tower and the building that houses Univision's offices.
Forty-nine properties owned by 34 owners saw reductions of at least $1 million, for a total drop of $370 million. They included large apartment blocks in Uptown as well as many of downtown's most recognizable skyscrapers
On average, the July "certified value" of those properties was 12 percent less than the notified value.
"There's just so much [empty] space," said Chuck Dannis, president of Crosson Dannis Inc., which specializes in real estate valuation. "2003 may be the year we hit bottom."
Downtown Dallas is not alone in struggling to fill its office space. Chicago, Los Angeles, Boston and Atlanta have seen many tenants flee.
In Dallas, the May-through-July protest period saw a reduction of 8 percent in the market value assigned to commercial properties citywide and a 1 percent decline in the total value assigned to residential properties. In some cases, owners may seek to lower their tax liability further through lawsuits.
In recent years, many of the major downtown owners have beaten a path to the courthouse.
Improving downtown
Thom Ridnour, Trizec Properties' regional vice president, said that many top-level executives, including himself, are working not only to safeguard their companies' bottom lines but also to make downtown a more vibrant place. Mr. Ridnour serves on the mayor's Inside the Loop Committee, which has come up with a comprehensive strategy to generate both private and public investment in downtown.
"Downtown has to get healthier" if the city is to flourish, he said, because downtown includes a major share of the tax base.
"We've got a problem in 2003 relative to the [downtown] tax base," he said. But he echoed Mr. Dannis' suggestion that the worst may already have transpired.
"Things tend to spike in Dallas," he said. "They spike down, and they spike up. We're kind of at the bottom again. We'll come back."
Belo Corp., owner of The Dallas Morning News, was among the downtown owners that won substantial reductions in assessed values.
Deloitte & Touche obtained a reduction of $882,000 off the initial $12.8 million appraisal on the Belo Building, the corporation's 17-story headquarters on Record Street. A different tax agent was responsible for taking $1.3 million off the original appraisal of $15.5 million of the complex on Young Street that houses the newspaper, WFAA-TV and TXCN cable news.
A Belo spokesman said the protest concerning the office building rested on data about the prevailing market for downtown office space.
The process
Many disputes over appraisals are resolved in informal talks between owners and appraisal district staff members. Those that aren't generally are heard by a three-member panel of the larger Appraisal Review Board, whose members are appointed by the appraisal district's board of directors.
The directors are appointed by city councils and other government bodies within the district's boundaries.
Appraisals on houses are based almost wholly on what homes of comparable size are selling for in nearby neighborhoods. Commercial appraisals also rest on sales figures, combined in the case of office buildings and apartments with data about occupancy and rental rates.
The appraisal district's initial assessment rests on general information about market conditions; owners who protest must supply specific information to demonstrate why their properties do not conform to typical market patterns.
"They might say, 'We've got more vacancies than you were aware of,' " Ms. Jordan said.
If the appraisers undervalue a property, the owner has no obligation to correct the mistake.
"When we're high, they have a lot of incentive to tell us," Ms. Jordan said. "If we're too low, guess what? We don't hear from them."
Both appraisal district officials and city council members said the system would be fairer if businesses were forced to supply more information.
"The council is frustrated," said council member Veletta Forsythe Lill. "The council has complained bitterly."
Ms. Lill, whose district encompasses the downtown core, doesn't fault the big developers for trying to minimize their tax liability.
"I do understand that they have to make a profit from their buildings," she said. "But the residential owners don't want to pay more than their fair share, either."
'Major problems'
Mr. Blaydes said he's most concerned that apartment owners may be paying too little. He said there's often a discrepancy between what apartment blocks are appraised at and what similar properties are selling for.
"I think we have major problems there," he said.
"We will be seeking a closer look," Mr. Blaydes promised. "It affects the money we have to run the city on."
The $2.6 million the city will lose as the result of protests on downtown properties would hire 40 additional police officers or senior librarians. It's a little less than 1 percent of all the money the city expects to get from property taxes in the next fiscal year.
Ms. Arbuckle said most homeowners are willing to pay what they're assessed – even if it's an increase – as long as they feel they're getting good city services.
Even though she's a longtime neighborhood activist, she said, she had never lodged a protest until last year, when her appraisal jumped by nearly 50 percent. And although she's a lawyer, she said, she didn't know what to expect.
"It's not that clear what factors they're going to weigh," Ms. Arbuckle said. She was also surprised, she said, to arrive at the hearing and learn that she would have only five minutes to make her presentation.
Ms. Jordan said all protests, big and small, are handled with equal care. "We treat them all the same," she said. "We want the right value."
Ms. Arbuckle said she has no wish to pit homeowners against business owners.
But by the same token, she said, one of Dallas' strengths is that homes are relatively affordable.
"That's a huge draw," she said. "If the cost of home ownership gets too high, people can't afford to live that American dream."